Woori Financial Group Accelerates Non-Bank Expansion... Securities Firm Next After Capital (Comprehensive)

Recent Capital Increase of Woori Investment & Securities... Prospects of Transition to Mid-to-Large Securities Firm

[Asia Economy Reporter Kangwook Cho] Woori Financial Group is accelerating the expansion of its non-bank portfolio. Starting with the acquisition of Aju Capital and Aju Savings Bank, it has recently been pushing for a paid-in capital increase of Woori Comprehensive Financial, showing an unstoppable stance in mergers and acquisitions (M&A). The market expects that the moves of Woori Financial Group Chairman Sohn Tae-seung, who has aimed to become the 'No. 1 comprehensive financial group,' will head toward the acquisition of a securities firm.

Woori Comprehensive Financial Completes 100 Billion KRW Paid-in Capital Increase... Merger Scenario After Conversion to Securities Firm Also Considered

According to the financial sector on the 13th, Woori Financial recently completed a paid-in capital increase of 100 billion KRW for its affiliate Woori Comprehensive Financial. This capital increase was conducted through a shareholder allocation followed by a partial public offering. Payment was completed on the 5th, and the new shares are scheduled to be listed on the 17th. Woori Financial also carried out a 100 billion KRW paid-in capital increase for Woori Comprehensive Financial in 2017, which had the effect of increasing Woori Comprehensive Financial's equity capital and profits by about two to three times. Woori Financial plans to use the funds raised through this capital increase to expand businesses such as investment banking (IB) operations and bond management.

The market views this paid-in capital increase of Woori Comprehensive Financial as part of a plan to acquire a securities firm, convert Woori Comprehensive Financial into a securities firm, and merge them to quickly rise to a mid-to-large securities firm. Previously, Woori Financial had reviewed both the conversion of Woori Comprehensive Financial into a securities firm and the acquisition of a securities firm followed by a merger with Woori Comprehensive Financial. When Chairman Sohn took office in December 2017, he declared plans to build a complete comprehensive financial group by stating, "To become a comprehensive financial group, we must have high-quality non-bank subsidiaries." Woori Bank does not currently have a securities affiliate, having sold Woori Investment & Securities along with Woori Aviva Life Insurance as a package to NH Nonghyup Financial Group in 2013.

Continued Attempts to Sell Securities Firms... Is Woori Financial Loosening Its Restraint on M&A?

In particular, amid this year's stock market boom and the steady performance of securities firms, movements to acquire small and medium-sized securities firms are stirring, which lightens Woori Financial's steps that had restrained M&A activities due to the COVID-19 pandemic. In the financial sector, it is known that DGB Financial Group, which has Daegu Bank as its main affiliate, recently inquired about the willingness to sell DB Financial Investment, Hyundai Motor Securities, and KTB Investment & Securities. DGB Financial reportedly plans to strengthen its non-bank sector capabilities by acquiring additional securities firms, as Hi Investment & Securities, acquired in 2018, recorded a net profit increase of 87% year-on-year for the cumulative third quarter this year, playing a significant role in defending the group's performance. However, DB Financial Investment, Hyundai Motor Securities, and KTB Investment & Securities are understood to have conveyed to DGB Financial Group that they have no intention to sell.

Aju Capital to Become a Subsidiary Within the Year... Annual Combined Profit Expected to Reach 80 Billion KRW

Earlier, Woori Financial held a board meeting on the 23rd of last month and resolved to acquire Aju Capital, and three days later, on the 26th, it purchased 74.07% of Aju Capital's shares through an over-the-counter transaction. Recently, it has also submitted an application to the Financial Services Commission to incorporate Aju Capital as a subsidiary, showing swift moves to make Aju Capital a subsidiary within the year. By acquiring Aju Capital, Aju Savings Bank, which is 100% owned by Aju Capital, will also become a grandchild company of Woori Financial. The recent performance of financial holding companies has been largely determined by their non-bank portfolios, which is cited as the main reason for the accelerated pace. Considering that Woori Financial holds a 78% stake in Aju Capital, which posted a net profit of 101.6 billion KRW last year, Daishin Securities forecasts that an annual profit of 80 billion KRW will be added starting next year.

A financial sector official said, "The biggest reason Woori Financial Group ranked behind Nonghyup Financial in performance for two consecutive quarters is that it lacks a securities subsidiary and thus missed out on the windfall from the stock market boom," adding, "Considering that expanding the business portfolio through large-scale M&A is Chairman Sohn's long-cherished goal, Woori Financial is expected to accelerate its efforts to acquire a securities firm."

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